9 Tips for Boosting Profitability: By Strengthening Your Bank's Financial Performance Now, You Help Protect Your Institution against Acquisition in the Current Market Turmoil
Emmerich, Roxanne, ABA Bank Marketing
THIS YEAR PROMISES TO BE ANOTHER ONE OF UNREST IN THE FINANCIAL SERVICES INDUSTRY. There could be some major shakeouts--with weak banks being closed or acquired. In this worrisome economic environment, a number of bankers are nervously figuring out ways to strengthen their financial position in order to protect themselves against being a purchase target.
Over the years, my company has worked with a number of banks that were interested in improving their profitability. Some of these banks have upgraded themselves to the point that they are now among the top 5 percent of banks in the country in terms of performance.
We have observed the success of a variety of techniques that revitalize a bank's financial position. These include ways of boosting net interest margin; increasing the number of borrowers who have A+ credit; using unique selling propositions to earn new, premium-priced customers; and re-engineering the internal culture so that every employee is focused on those critical drivers that deliver profits.
Below are nine strategies that can help your bank become stronger, more proactive and more profitable than ever before.
1 Create a System for Attracting Profitable Organic Growth Before Acquiring Another Bank
Acquisition sounds sexy and easy. But when you acquire, you get the bad loans, the people who made them, and the mind-sets and skill sets of the executives who caused that bank to get into the shape it's in--plus the inevitable "us-versus-them" game-playing that typically takes two years to clean up. Now that's costly.
Since culture is the leading predictor of future growth and profitability, it isn't just the impact of having to transform the culture of the new bank that's costly. There's the even-more-costly impact on your own bank's culture--which is already results-driven, upbeat, possibility-oriented and downright rockin'. Plus, there's always the risk that changing the culture of the acquired bank won't work because the employees simply refuse to dance to your tune. It happens.
Although deals are aplenty and it's easy to believe that a good price is irresistible, you'll always want to consider organic growth first and get good at it. Then, and only then, Should you consider picking up one of those banks at bargain pricing.
Before you even think about acquiring, you have to have your own house in order. And, if you have that going for you, why risk it by acquiring a mess? Instead, leverage your strengths to spark organic growth.
2 Go to War with Low Return on Investment (ROI) Marketing
Marketing is a mind-set, and everyone must understand it. Marketing keeps, the top of the sales funnel full--and positions your organization to get premium pricing as it attracts those top 20 percent of customers who actually bring profits to your bank.
Alternatively, most banks think marketing is advertising. They waste resources buying cutesy slogan ads that have minimal ROI. They do "marketing studies" that tell them little about the psychographics of their most profitable customers. They do "brand advertising"--the biggest waste of resources of all because brand is culture and not smoke and mirrors. Nobody ever switched banks because they loved the logo. And, if the folks in marketing succumb to the pressure of your employees and really don't understand ROI from marketing dollars, they're advertising rates, thereby positioning the bank for a future of low profits and lack of respect in their market.
Marketing is not advertising. It's a mind-set to be owned by all Everybody!
Every person at your bank should: (1) know your target markets; (2) know how to communicate to target prospects why your bank is the answer to their problems; (3) clearly understand the unique selling proposition for each market that makes you desirable enough to pull business away from incumbents at premium pricing; and (4) understand the sales process and how to use it to get the client to tell you why you're worth 50 to 200 basis points more. …